Not for investors who cannot take on market gyrations
01-Mar-2007 •Value Research
With an aggressive equity and debt portfolio, this one was the best performer last year and the third best, the previous year.
Since January 2006, the allocation to equity has ranged from 20.61 per cent to 14.59 per cent but has averaged at around 18 per cent per month. This equity allocation has always been heavily tilted towards mid- and small-cap stocks. Though these stocks have averaged at around 79 per cent of the equity portfolio, in February and March 2006, they occupied the entire portfolio and the large-cap allocation was nil.
With such an equity slant, little wonder that the fund has performed well. In fact, its best one-year return of 22.10 per cent can be traced to May 2, 2005 to May 2, 2006 the peak of the bull run. That very same month, it had to contend with its worst monthly performance (May 15-June 14, 2006) of -5.35 per cent. The debt portfolio has a high credit risk. The average allocation to lower rated paper (including AA+, AA, AA-) since January 2006 has been 14.21 per cent. This has slowly increased in December 2006 (15.42 per cent) and January 2007 (22 per cent). In fact, the average credit rating in the past two months has been AA. However, the average maturity of this fund is not too long at around 1.16 years. While G-secs are a part of the portfolio, exposure has been gradually decreasing and now occupies just 0.01 per cent of the portfolio.
A look at the current data (as on February 12, 2007) of its one-year returns of 12.67 per cent (category average: 8 per cent) and two-year returns of 14.31 per cent (category average: 9.13 per cent), shows the fund way ahead of the category average. But these returns have been achieved by taking more risks. So opt for it if you are willing to ignore short-term bumps.